What makes you want to do your own business accounting? If your answer is along the lines of, “I want to save money”, you may be surprised to hear that many small business owners worry about their finances even after they’ve reached a comfortable level of growth.
That can mean they also see avoiding expenses as a safer option than making an investment. This is not true for every situation.
When you outsource accounting, it’s an extremely valuable investment. Plus, it costs much less than hiring an accountant - or any employee - to do it in-house. Consider the costs of hiring and onboarding, providing a salary and benefits, subscribing to a bookkeeping software, and maybe even working with an annual tax accountant as well.
At CSI Accounting & Payroll, we’ve spoken with thousands of small business owners over the past several decades, so we know what commonly drives people to want to do their own accounting. Here, we go over:
Accounting is often treated as something that can’t be changed - just done correctly or incorrectly. That’s not necessarily true; it’s also an opportunity to reduce your tax liability and strategize your decision-making throughout the year.
If an annual tax accountant does more than just file your taxes, they may also assist in the preparation process. However, this is typically where their services stop. If you make any big moves throughout the year, it can completely throw off whatever they had planned for next tax season. Not to mention, they may also miss expenses that are only shown in other documents if you have missed entering some things into your books.
Monthly accounting is different in that it’s hands-on throughout the year to consistently monitor your money moves. Not only that, but a monthly accountant can offer expert advice based on the financial statements they create for you and the discussions that occur in your meetings.
Speaking of meetings, ones centered around taxes are key. CSI includes the full tax package: planning, projection, and preparation. We typically have two major tax discussions per year, and at the end of each tax planning meeting, you should have a tax projection. Your annual taxes are also included in your monthly fee.
These services make all the difference when it comes to finding the best tax strategy for your business.
If you’re truly interested in doing your own accounting, here are the basics - as well as the issues that may arise if they’re not done by a professional. When you do your own accounting, you’re fully responsible for any mistakes that occur. If you don’t have a background in accounting, this is a major risk to your business.
Bookkeeping seems simple enough. That’s why many small businesses will either have the owner or an administrative employee step up to do it. Plus, most bookkeeping mistakes are simple to correct (if they’re caught quickly).
However, because bookkeeping eventually leads to taxes, record inaccuracies can cost you big time down the line. Working with an outsourced accounting service means that you’re covered in the case of an audit.
When the average small business owner talks about accounting, they are typically referring to monthly bookkeeping and annual taxes.
However, a monthly accountant will provide you with monthly financial statements to help guide you year-round. You can make your own as well! Here is how to see if your self-prepared financial statements are up to par.
You still need to get your taxes done! Typically, small business owners who do their own bookkeeping will still go to an annual tax accountant.
Make sure that your annual tax accountant has time for you though. Frequently, tax accountants don’t focus on business taxes and will be swamped working with individuals. Being put on extension isn’t ideal either because it doesn’t extend the date that your money is due.
There are consequences if you don’t file your taxes on time, and then you will need to get your back taxes done if you fall behind.
You will also need to analyze your business tax return once you receive it. If it doesn’t look right, it may be worth it to amend the return. A monthly accountant can assist you with this process if you’re not comfortable doing it yourself.
The final thing to consider when you’re deciding whether or not to do your own accounting is what your time is worth. This can be interpreted in a few different ways.
How much do you value your personal time? Life is more than just work. Even if you own a business that you’re passionate about, you need time away from it to nurture your personal relationships, time, and outside responsibilities.
At the very least, if your business has reached a comfortable level of growth, you should be able to take some time for yourself each day and a day or two off each week.
Chances are, you’re not as efficient with accounting as a monthly accountant is. Is spending more time at work worth it?
Is spending your time on accounting worth it to save a small amount of money? Are you even technically saving money when you consider how much your work is valued at per hour?
Be sure you know what your time is worth. Ask yourself: What is my salary? If I were to hire myself, what would I pay per hour?
For example, your accounting fee is $600/month and your time is worth $150/hour. If you are spending more than four hours each month on your accounting and tax work, you are losing. You still likely have to have an accounting firm look at it as well if you are not 100% accurate with what you do.
Plus, if you came up with even one idea to grow your business instead of doing accounting in the meantime, it pays off!
How much could you grow your business’s profitability if you had more free time to brainstorm, plan, and execute? For example, you could be working on growing your sales and marketing strategies to increase your profits.
Maybe you could even find the time to fix something that’s been going wrong - and that could mean the difference between closing your doors or not! For example, taking time to address customer complaints, law violations, quitting employees, or dropping sales is invaluable.
You could even use your time to network. Taking time to connect with fellow small business owners and industry-related groups can help you learn new things specific to your business. You don’t know what you don’t know!
Congratulations! You should now have the basic knowledge to begin doing your own small business accounting.
It goes beyond just trying to save money upfront, though. When you consider the value of accounting, everything that goes into doing your own accounting (plus everything that can go wrong), and what your time is worth, you might have a new perspective on doing it all yourself.
If you’re interested in having a conversation about the valuable investment that outsourcing accounting is, click the button below to schedule a free consultation.
Still want to DIY accounting? You’re going to need the right tools! Click the button below to download the free Small Business Accounting Kit, complete with: